EMPLOYMENT CONTRACT


THIS CONTRACT OF EMPLOYMENT (hereinafter "Contract") is made in
Indianapolis, Indiana, dated and effective January 1, 2002, by and
between STANDARD MANAGEMENT CORPORATION, an Indiana Corporation,
and all wholly owned subsidiaries of the above named corporations
(hereinafter the "Company"), and John J. Dillon (hereinafter
"Executive").

	Recitals

A.	Executive is expected to make a major contribution to the
profitability, growth and financial strength of the Company.

B.	The Company considers the services of the Executive to be in
the best interest of the Company and its shareholders and desires
to assure the services of the Executive on behalf of the Company
on an objective and impartial basis and without distraction or
conflict of interest in the event of an attempt to obtain
control of the Company.

C.	Executive is willing to become employed by the Company under
the terms and conditions hereof and upon the understanding that
the Company will provide him with the income security herein if
his employment is terminated by the Company or if he voluntarily
terminates his employment for good reason.

NOW, THEREFORE, in consideration of the mutual agreements
contained herein, the parties to this Contract hereby agree as
follows:


	Agreement

1.	Employment.  The Company hereby agrees to employ Executive as
Executive Vice President - Administration of the Company.
Executive accepts such employment and agrees to be subject to the
general supervision, orders, advice and direction of the President
and Chief Executive Officer and the Board of Directors of the
Company in a manner consistent with the Articles of Incorporation
and By-Laws of the Company.

2.	Terms of Employment and Compensation.  Executive's term of
employment (the "Employment Term") hereunder shall start on
January 1, 2002 and continue until such employment terminates
pursuant to Section 7 hereof.



3.	Salary and Bonus.  Executive's salary for the first year
hereunder shall be $155,000.00 per year.  Thereafter during the
Employment Term, Executive's salary shall be increased each year
by an amount equal to Executive's salary for the previous year
multiplied by the percent change of the Consumer Price Index for
all Urban Consumers (the "CPI") (published by the Bureau of Labor
Statistics, United States Department of Labor) during the
immediately preceding calendar year.  For example, if the percent
change in the CPI from January 1, 2002 to December 31, 2002 were
5%, Executive's salary for the second year hereunder would be
$162,750.00.  Executive's salary shall be payable on the
Company's regular salary payment dates.  In addition, within 90
days after the end of each fiscal year during the Employment Term,
Executive shall receive a bonus.  The bonus paid to Executive
shall be one-half of one percent (1/2%) of the annual gross
operating income of the Company paid within ninety (90) days
after the close of each fiscal year covered hereunder.  Provided,
however, that in no event shall said bonus be less than ten
percent (10%) of the annual salary of Executive for the year in
consideration.

The salary and bonus payments hereunder shall be subject to
withholding and any other applicable tax law.

4.	Salary Guarantee.  All salaries payable to the Executive
under the Agreement will be guaranteed (the "Guaranteed Payments")
as of the effective date of the Agreement for the full Employment
Term of the Agreement except for terminations for violations found
in Section 7(b) (c) (d) or (e) hereof.

(a)	After the initial three year Employment Term of Guaranteed
Payments, any additional one year extensions made pursuant to the
terms of Section 7(a) will be guaranteed once the notice period
for the extension or termination period found in Section 7(a) has
passed.

(b)	None of the Guaranteed Payments described in this Section
shall prevent the Executive from receiving the Termination
Benefits described in Section 13 of the Agreement.

(c)	All Guaranteed Payments described in this Section and payable
to the Executive shall be payable to the Estate of John J. Dillon
in the event of death of the Executive.

(d)	In the event of any mental disability which renders the
Executive unable to fulfill his duties pursuant to Section 1 of
this Agreement, all Guaranteed Payments shall be made to John J.
Dillon's spouse, his attorney in fact, his personal
representative, his guardian, or any other such person legally
specifically listed, to whomever is legally authorized to receive
monetary payments due and owing to John J. Dillon.

(e)	In the event of any physical disability which renders the
Executive unable or unwilling to fulfill his duties pursuant to
Section 1 of this Agreement, all Guaranteed Payments shall be made
directly to the Executive.

(f)	Upon the termination of Executive=s employment for any reason
other than pursuant to Section 7(b), (d) or (e) hereof, the
Company shall pay to Executive in a lump-sum payment, within
thirty (30) calendar days after such termination, the salary
received by him on the date of such termination in an amount equal
to two (2) years of annual salary.

5.	Reimbursement for Expenses.  The Company shall, during the
Employment Term, reimburse Executive for all reasonable travel,
business entertainment and other business expenses incurred by
Executive in rendering services under this Contract.  Such
reimbursement shall be subject to compliance with the applicable
policies and procedures established by the Company.  During the
Employment Term, Executive shall be entitled to an automobile
allowance of $500.00 per month.

6.	Fringe Benefits.  During the Employment Term, Executive shall
be entitled to participate in the Company's corporate, medical and
disability insurance plans.  The Company shall also provide
Executive with keyman split dollar term life insurance in the
amount of $2,500,000, $2,000,000 of which shall be payable to
Executive's spouse and the balance of $500,000 shall be payable to
the Company.  Executive shall be entitled to all other fringe
benefits generally provided for salaried employees of the Company
upon attaining eligibility as provided under such fringe benefit
programs.  Executive shall be entitled to three (3) weeks vacation
per year.

7.	Termination.  The Employment Term shall terminate on the
first to occur of the following events:

(a)	the third anniversary of the date on which the Employment
Term become effective; provided, however, that after such third
anniversary, the Employment Term shall be extended each year
thereafter for an additional one year period unless either party
gives the other written notice at least 90 days before such
extension of its intention not to renew the Contract;

(b)	termination by the Company for cause, upon written notice
(specifying the particulars) to Executive from the Company's Board
of Directors, which cause shall be limited to:

(i)  the persistent failure of or refusal by Executive to
comply with the material orders, advice, directions, policies,
standard and regulations of the Company and its President or Board
of Directors, as promulgated from time to time, or with the
provisions of this Contract, which failure or refusal is
detrimental to the Company, if Executive does not correct such
failure or refusal within 60 days after written notice,

(ii)  an act or acts of fraud or dishonesty by Executive
resulting in or tending to result in gain to or personal
enrichment of Executive at the Company's expense;

(iii)  any felony conviction of Executive or material tort
which is detrimental to the Company; or

(iv)  the persistent absence of Executive from his employment
without cause or explanation;

(c)	the death of Executive;

(d)	the 90th day after notice from the Company to Executive that
Executive is considered to be permanently disabled due to his
inability to perform his duties or fulfill his responsibilities
hereunder, which inability existed for a period of 90 days or more
before such notice; or

(e)	termination by Executive, at his option, after 90 days prior
written notice to the Company.

Upon termination of Executive's employment pursuant to Section
7(b) (c) (d) or (e), Executive (or his estate) shall receive (i)
any unpaid salary payments with respect to periods prior to the
date of termination, and (ii) any termination, disability or death
benefits to which he is entitled under any employee benefit
plan of the Company which is in effect at the time of the
termination of his employment.  In all other events of
termination, Executive shall continue to receive the Guaranteed
Payments.

8.	Agreement Not To Compete.  Executive agrees that if his
employment is terminated by the Company pursuant to Subsection
7(b) hereof he shall not, for a period of one year from the date
his employment hereunder terminates, (x) directly or indirectly
sell or attempt to sell, within Indiana, on behalf of
himself or any other person, corporation or entity, any type of
product marketed by the Company at the time his employment is
terminated, (y) directly or indirectly sell or attempt to sell any
type of product marketed by the Company at the time his employment
is terminated to any person, corporation or other entity that is a
customer of the Company at the time his employment is terminated,
and (z) within Indiana, directly or indirectly, own, manage,
operate, control, be employed by, participate in, or be connected
in any manner with the ownership, management, operation, or
control of any business similar to the type of business
conducted by the Company at the time of termination of Executive's
employment hereunder; provided, however, that Executive may be a
shareholder of less than 5% of the outstanding shares of voting
stock of any company listed on a recognized stock exchange or
traded in the NASD over-the-counter market.

9.	Technical Information.  Executive covenants and agrees that
during the Employment Term and for a period of six months after
termination of the Employment Term (regardless of whether
Executive is terminated or defaults under any other provision of
this Contract) he will assign to the Company or its
nominees all of his right, title and interest in and to all
"Technical Information" (as hereinafter defined) which he makes,
develops or conceives, either alone or in conjunction with others;
he will disclose promptly to the Company all such Technical
Information; and he will cooperate with the Company in
its efforts to protect its rights of ownership in such Technical
Information.  For purposes of this Contract, "Technical
Information" shall mean and include, but not be limited to, all
software, processes, devices, trademarks, trade names,
copyrights, marketing plans, improvements, and ideas relating to
the business of the Company, and all goodwill associated with any
such item.

10.	Covenant Against Disclosure of Technical and Confidential
Information.  Executive agrees that while he is employed by the
Company and thereafter he shall not, directly or indirectly,
disclose or use to the detriment of the Company or for the benefit
of any other person, corporation or other entity, any confidential
information or trade secret (including, but not limited to, the
identity and needs of any customer of the Company, the method and
techniques of any of the business of the Company, the marketing,
sales, costs and pricing plans and objectives of the Company, the
problems, developments, research records, and Technical
Information) of the Company, or any of the affiliates of
the Company.  Furthermore, Executive shall deliver promptly to the
Company upon termination of his employment, or at any time the
Company may so request, all memoranda, notes, records, reports,
manuals, software, models, designs, and other documents and
computer records (and all copies thereof) relating to the business
of the Company, and all property associated therewith, which he
may then possess or have under his control.  This Contract
supplements and does not supersede Executive's obligations under
statute or the common law to protect the Company's trade secrets
and confidential information.

11.	Remedy.  Executive acknowledges that the restrictions
contained in Sections 8 through 10 of this Contract are reasonable
and that the legal remedies for breach of the covenants which are
contained in Sections 8 through 10 of this Contract may be
inadequate and, therefore, agrees that, in the event of any
actual or threatened breach of any such covenant, in addition to
any other right or remedy which the Company may have, the Company
may:  (a) seek specific enforcement of any such covenant through
injunction or other equitable relief, and (b) recover from
Executive an amount equal to (i) all sums paid by the
Company to him after commencement of the breach, plus (ii) all
costs and expenses (including attorneys' fees) incurred by the
Company in enforcement of the covenant, plus (iii) all other
damages to which the Company may be legally entitled.

12.	Undertaking To Pay Termination Benefits.  In addition to the
payments Executive shall receive under Section 4 hereof in the
event of the termination of his employment, the Company agrees to
pay to the Executive the Termination Benefits specified in Section
13 hereof if (a) control of the Company is acquired (as defined in
paragraph 14(a) hereof) and (b) within three years after the
acquisition of control occurs (i) the Company terminates the
employment of Executive for any reason other than pursuant to
Section 7(b), 7(c) or 7(d) hereof, or (ii) Executive voluntarily
terminates his employment for good reason (as defined in Section
14(b) hereof).

13.	Termination Benefits.  If Executive is entitled to
termination benefits pursuant to paragraph 12 hereof, the Company
agrees to pay to Executive as termination compensation in a lump-
sum payment within five calendar days of the termination of
Executive's employment an amount to be computed by multiplying
(a) Executive's average annual compensation payable by the Company
which is includable in the gross income of Executive for the most
recent five calendar years ending coincident with or immediately
before the date on which control of the Company is acquired (or
such portion of such period during which Executive was an employee
of the Company, by (b) 299%.  For purposes of this Contract,
employment and compensation paid by an direct or indirect
subsidiary of the Company, if any will be deemed to be employment
and compensation paid by the Company.

(a)	The Termination Benefits described in this section are
payable to the Executive regardless of any determination by the
Company's independent public accountants that payments made
pursuant to this section are or would be non-deductible by the
Company for federal income tax purposes because of Section 280G of
the Internal Revenue Code of 1986 or any subsequent revisions in
the Internal Revenue Code.

14.	Definitions.

(a)	As used in this Contract, the "acquisition of control": means
(i) attaining ownership of 15% or more of the shares of voting
stock of the Company by any person or group (other than a person
or group including Executive or with whom or which Executive is
affiliated), or (ii) the occurrence of a "change of control"
required to be described under the proxy disclosure rules of the
Securities and Exchange Commission.

(b)	As used in this Contract, the term "good reason" means,
without Executive's written consent, (i) a change in Executive's
status, position or responsibilities which, in his reasonable
judgment, does not represent a promotion from his status, position
or responsibilities as in effect immediately prior to the change
in control; the assignment to Executive of any duties or
responsibilities which, in his reasonable judgment, are
inconsistent with such status, position or responsibilities;
or any removal of Executive from or failure to reappoint or
reelect him to any of such positions, except in connection with
the termination of his employment for total and permanent
disability, death or pursuant to Subsection 7(ii) or 7(iii) herein
or by him other than for good reason; (ii) a breach by the Company
of its covenants under this Contract after a change in control;
(iii) the relocation of the Company's principal executive offices
to a location outside the Indianapolis, Indiana metropolitan area
or the Company's requiring him to be based at any place other than
the location at which he performed his duties prior to a change
in control except for required travel on the Company's business to
an extent substantially consistent with his business travel
obligations at the time of a change in control; (iv) the failure
by the Company to continue to provide Executive with benefits
substantially similar to those enjoyed by him or to which he was
entitled under any of the Company's pension, profit sharing, life
insurance, medical, dental, health and accident, or disability
plans in which he was participating at the time of a change in
control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive him of any material fringe benefit enjoyed by him or to
which he was entitled at the time of the change in control, or the
failure by the Company to provide him with the number of paid
vacation and sick leave days to which he is entitled on the basis
of years of service with the Company in accordance with the
Company's normal vacation and sick leave policies and consistent
with Section 6 of this Contract; (v) the failure of the Company to
obtain a satisfactory agreement from any successor or assign of
the Company to assume and agree to perform this Contract; (vi)
any purported termination of Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection 15(c) hereof (and, if applicable,
Subsection 7(b) hereof); and for purposes of this Contract, no
such purported termination shall be effective; or (vii) any
request by the Company that Executive participate in an unlawful
act or take any action constituting a breach of Executive's
professional standard of conduct.

Notwithstanding anything in this paragraph 14(b) to the contrary,
Executive's right to terminate his employment pursuant to
paragraph 12 herein shall not be affected by his incapacity due to
physical or mental illness.

15.	Additional Provisions Relating To Termination.

(a)	The Company is aware that the Board of Directors or
shareholders of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this
Contract, or may cause or attempt to cause the Company to
institute, or may institute litigation seeking to have this
Contract declared unenforceable, or may take or attempt to take
action to deny Executive the benefits intended under this
Contract.  In these circumstances, the purpose of this Contract
could be frustrated.  It is the intent of the Company that
Executive not be required to incur the expenses associated with
the enforcement of his rights under this Contract by litigation or
other legal action, nor be bound to negotiate any settlement of
his rights hereunder, because the cost and expense of such legal
action or settlement would substantially detract from the benefits
intended to be extended to Executive hereunder.  Accordingly, if
following a change in control, if it should appear to Executive
that the Company has failed to comply with any of its obligations
under this Contract or in the event that the Company or any
other person takes any action to declare this Contract void or
unenforceable, or institutes any litigation or other legal action
designed to deny, diminish or to recover from Executive the
benefits entitled to be provided to Executive hereunder, and that
Executive has complied with all of his obligations under this
Contract, the Company irrevocably authorizes Executive from time
to time to retain counsel of his choice, at the expense of the
Company as provided in this Subsection 15(a), to represent
Executive in connection with the initiation or defense of any
litigation or other legal action, whether such action is by or
against the Company or any director, officer, shareholder, or
other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship
between the Company and such counsel, the Company irrevocably
consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection the Company
and Executive agree that a confidential relationship shall exist
between Executive and such counsel.  The reasonable fees and
expenses of counsel selected from time to time by Executive as
hereinabove provided shall be paid or reimbursed to Executive by
the Company on a regular, periodic basis upon presentation by
Executive of a statement or statements prepared by such counsel in
accordance with its customary practices, up to a maximum aggregate
amount of $50,000.00.  Any legal expenses incurred by the Company
by reason of any dispute between the parties as to enforceability
of or the terms contained in this Contract, notwithstanding
the outcome of any such dispute, shall be the sole responsibility
of the Company, and the Company shall not take any action to seek
reimbursement from Executive for such expenses.

(b)  The amounts payable to Executive under this Contract shall
not be treated as damages but as severance compensation to which
Executive is entitled by reason of termination of his employment
in the circumstances contemplated by this Contract.  The Company
shall not be entitled to set off against the amounts payable to
Executive of any amounts earned by Executive in other employment
after termination of his employment with the Company, or any
amounts which might have been earned by Executive in other
employment had he sought such other employment.

(c)	Any purported termination by the Company or by Executive
shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 22 hereof.  For
purposes of this Contract, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in
this Contract relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of his employment under the provision so indicated.
For purposes of this Contract, no such purported termination
shall be effective without such Notice of Termination.

(d)	In addition to any payments, termination benefits or any
other benefits Executive is entitled to receive hereunder, in the
event of a change or acquisition of control, the Company agrees to
pay the Payment Amount (as hereinafter defined) to the Executive
in a lump-sum payment within thirty (30) calendar days after the
termination of Executive's employment for any reason, including,
without limitation, termination of employment by the Company,
termination of employment by the Executive and termination of
employment by reason of death.  The "Payment Amount" shall
be the product, determined as of the date of Executive's
termination of employment, determined by (i) multiplying the
number of shares of common stock of the Company then subject to
unexercised options ("Unexercised Options") held by the Executive
which were granted by the Company or an affiliate of the Company
by (ii) the highest per share fair market value of the common
stock on any day during the period beginning six (6) months
prior to the date of Executive's termination of employment.  For
purposes of this provision, Unexercised Options shall include all
outstanding options whether or not they are exercisable at the
time of the election by Executive hereunder.  There shall be no
deduction of Executive's exercise price per share for each
Unexercised Option from the amount to be received by him pursuant
to this subsection (d).  Upon payment by the Company of the
Payment Amount in accordance with this subsection (d), the
Unexercised Options shall be deemed to be surrendered by the
Executive and cancelled by the Company.  Such cancellation shall
be effective regardless of whether the Executive surrenders an
agreement relating to any Unexercised Option.

16.	Entire Agreement.  This Contract contains the entire
agreement of the parties relating to the employment of Executive
by the Company, superseding any and all prior such agreements, and
cannot be amended, modified, or supplemented in any respect except
by subsequent written agreement entered into by the parties.

17.	Benefit.  Executive acknowledges that the services to be
rendered to him are unique and personal; accordingly, Executive
may not assign any of his rights or delegate any of his duties or
obligations under this Contract.  The rights and obligations of
the Company under this Contract shall inure to the benefit of, and
be binding upon, the legal representatives, successors and assigns
of the Company.

18.	No Waiver.  No failure on the part of either party at any
time to require the performance by the other party of any term of
this Contract shall be taken or held to be a waiver of such term
or in any way affect such party's right to enforce such term, and
no waiver on the part of either party of any term in this Contract
shall be taken or held to be a waiver of any other term hereof or
the breach thereof.

19.	Severability.  The provisions of Sections 8 through 11 hereof
are severable, and the invalidity or unenforceability of any
particular provision of Sections 8 through 11 shall not affect or
limit the enforceability of the other provisions.  If any
provision in Sections 8 through 11 hereof is held unenforceable
for any reason, including the time period, geographic area, or
scope of activity covered, then such provision shall be enforced
to whatever extent is reasonable and enforceable.

20.	Governing Law.  This Contract shall be governed and construed
in accordance with the law of the State of Indiana (other than the
provisions relating to choice of law).  The Contract may be
brought in any state or federal court of record in Indianapolis,
Indiana and the parties hereto waive any right to question the
jurisdiction of such court over their person or the property of
such venue.

21.	Captions.  The captions in this Contract are for convenience
and identification purposes only, and not an integral part of this
Contract, and are not to be considered in the interpretation of
any part hereof.

22.	Notices.  All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
in writing and personally delivered to the party to whom notice
should be given or if sent by registered or certified mail,
postage prepaid, addressed to the addresses set forth below, or
to such other addresses as shall be furnished in writing by either
party to the other:

John J. Dillon
7477 North Pennsylvania
Indianapolis, IN  46240

To the Company:

Standard Management Corporation
10689 N. Pennsylvania
Indianapolis, IN  46280
Attn: Ronald D. Hunter, Chairman




(Signature Page Follows)



IN WITNESS WHEREOF, the Company has caused this Contract to be
executed on its behalf by its duly authorized officer and
Executive has hereunto set his hand as of the 1st day of January,
2002.


STANDARD MANAGEMENT CORPORATION
AND ALL WHOLLY OWNED SUBSIDIARIES


By:
Ronald D. Hunter
Chairman, President and Chief Executive
Officer
Attest:


Stephen M. Coons
Secretary
EXECUTIVE




John J. Dillon